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We audited the City of Detroit’s Neighborhood Stabilization Program-funded demolition activities under the Housing and Economic Recovery Act of 2008.  We selected the City based on a request from the Office of Inspector General’s Office of Investigation to work jointly with it on the assignment.  Our objectives were to determine whether the City complied with Federal regulations in its (1) maintenance of accounting records for activities and (2) drawing down of Program funds for activities.

The City did not maintain records that adequately identified the source and application of funds provided for its activities.  Further, it inappropriately drew down Program funds (1) when it had fire insurance funds and Program refunds available and (2) for duplicate demolition costs.  As a result, nearly $2.3 million in Program funds was not available for eligible Program costs.  Further, the U.S. Treasury paid more than $76,000 in unnecessary interest on Program funds that the City inappropriately drew down when it should have used available fire insurance funds.

We recommend that the Director of HUD’s Detroit Office of Community Planning and Development ensure that the City spent nearly $2.1 million in fire insurance funds and Program refunds for eligible Program costs.  We also recommend that the Director require the City to (1) use nearly $204,000 in fire insurance funds and duplicate Program drawdowns for eligible Program costs, (2) reimburse HUD from non-Federal funds more than $76,000 in unnecessary interest paid by the U.S. Department of the Treasury, (3) maintian adequate accounting records for activities, and (4) implement adequate procedures and controls to address the finding cited in this audit report.